House Democrats say, "No more COBRA subsidy for you!"

Maryalene LaPonsie |
June 15, 2010

By: Maryalene LaPonsie

After spending billions and more to bail out everyone from AIG to Merrill Lynch to Chrysler, Congress seems to be taking a cue from the Seinfeld Soup Nazi. Rather than extend a COBRA subsidy program, House Democrats decided the $7.8-billion price tag was too much to swallow and are cutting off the proverbial gravy train. Unfortunately, as the thousands of families who relied on the subsidy for health insurance coverage can attest, the COBRA subsidy was more of a lifeline than an example of government excess.

Health insurance through COBRA

For the uninitiated, COBRA stands for more than just a deadly snake. It represents the Consolidated Omnibus Budget Reconciliation Act. While that is a lot of fun to say, most people refer to it instead as COBRA. Among the act's many provisions is the requirement that workers who lose their jobs be able to continue their group health insurance.

As we await the implementation of health care reform, group plans continue to be vital for individuals and families needing medical coverage for pre-existing conditions. While individual health insurance policies can and do deny coverage for these medical needs, group policies are prohibited from discriminating against plan members in this way.

Although COBRA allows workers to continue their coverage, it comes at a steep price. The group health plans offered as an employment benefit are usually heavily subsidized by employers. Once an employee starts their COBRA coverage, they are responsible for paying the entire premium amount. Nationally, the average price tag for COBRA coverage is an eye-popping $13,500 per year. Clearly, good coverage doesn't equal cheap health insurance!

Laid-off workers who elected to continue their group health insurance through COBRA received relief through the 2009 American Recovery and Reinvestment Act (aka Stimulus Bill). As part of the $787-billion stimulus plan, the federal government would pay 65 percent of the COBRA premium for a limited time for workers who involuntarily lost their jobs between September 1, 2008 and May 31, 2010.

The subsidy, originally planned to last 9 months and then extended to 15 months, was intended to provide families with temporary health insurance while workers looked for a new job. The COBRA subsidy brought the average health insurance cost down to a more manageable $4,725 per year.

House Democrats just say 'no' to the COBRA subsidy

Now, $787 billion total stimulus dollars later, House Democrats have decided that the $7.8 billion price tag on extending the COBRA subsidy through November 30, 2010, is too rich for their taste. While the COBRA subsidy extension was originally included as part of a $134-billion jobs bill in Congress, it was dropped as being too expensive.

So now, according to CNNMoney.com, jobless Americans must fork over, on average, 84 percent of their unemployment check if they want to continue group health insurance through COBRA. An amendment in the Senate would extend the subsidy, but it remains to be seen whether it can muster the votes to pass.

In the meantime, the unemployed and their families must feel like second class citizens...sent to the back of the soup line to stand behind big business and special interest groups. While business tax incentives and other corporate goodies continue to flow from Washington, working class families are told 'No health insurance subsidy for you!"